The Designated Driver

Investing is  a game of probabilities. Even if one makes the higher probability bet, there is a chance the long shot will come in. However, over time if one makes the higher probability bets consistently, the chances of outperforming become much greater. I view my job as finding those higher probability bets.

Given the current state of sentiment, I view the market as offering a poor risk/reward. I might turn out to be wrong and the market can grind higher. However, if I avoid markets where there is extreme optimism(great chart from SentimenTrader via DynamicHedge) and invest in markets where there is extreme pessimism, like this Fall, I believe I will outperform. That means having to miss out once in a while there is a party going on.  I guess I'm the designated driver.

1 comment:

Weekend Reading #4 – Finance and Investing Links 2-11-12 said...

[...] The Designated Driver – Investing is a game of probabilities. – Capital Observer [...]